Changes to contractor VAT from 1 October 2019

We have alerted building contractors and sub-contractors in previous newsletters of changes to the VAT rules from 1 October 2019.

In a nut-shell, if you are subject to the Construction Industry Scheme and if you are registered for VAT, from the 1 October 2019 you may need to change the way you account for VAT on supplies between sub-contractors and their contractor customers.

At present, sub-contractors registered for VAT are required to charge VAT on their supplies of building services to contractors. From 1 October this approach is changing.

From this date sub-contractors will not add VAT to their supplies to most building customers, instead, contractors will be obliged to pay the deemed output VAT on behalf of their registered sub-contractor suppliers.

This does not mean that contractors, in most cases, are paying their sub-contractors’ VAT as an additional cost.

When contractors pay their sub-contractors’ VAT to HMRC they can claim back an equivalent amount as VAT input tax; subject to the usual VAT rules. Accordingly, the two amounts off-set each other.

The change is described as the Domestic Reverse Charge (DRC) for the construction industry. It has been introduced as an increasing number of sub-contractors have been registering for VAT, collecting the VAT from their customers, and then disappearing without paying the VAT collected to HMRC.

Beware cash flow concerns

However, the change to DRC may create cash flow issues especially if you use the VAT Cash Accounting Scheme or the Flat Rate Scheme.

We recommend that all affected CIS readers contact us so we can help you make the necessary changes to your invoicing and accounting software and reconsider the use of VAT special schemes if your continued use would adversely affect your cash flow.

Why you may need an EORI number

The end of next month, 31 October 2019, is the latest deadline for our exit from the EU and the recent hiatus seems to be pushing the UK ever closer to a no-deal outcome.

Accordingly, if you are involved in buying or selling goods to EU countries, you should apply now for an Economic Operator Registration and Identification (EORI) number.

Without an agreed withdrawal with the EU, you will need an EORI number that starts with GB to move goods in or out of the UK. Additionally, if you want to trade with an EU country you will also need an EU EORI number. It will start with the country code of the EU country you got it from. You should apply for one from the customs authorities in the EU country you will trade with.

Apparently, you do not need an EORI number if you are only moving goods between Northern Ireland and Ireland.

If you do not apply, you may be faced with increased costs and delays. For example, if HMRC cannot clear your goods you may have to pay storage fees. Clearly, these delays could have serious repercussions if your exported goods are mired in red-tape at border crossings – your EU customers may look elsewhere for supplies – or your production and delivery in the UK may be affected if you cannot affect delivery of supplies from the EU.

There is a simple online application process to apply and there is no obligation to use the number if by some miracle we agree withdrawal terms with the EU before 31 October.

Autumn Budget 2019

If there was a measure of stability in UK politics, we would be expecting the usual dispatch-box presentation by the Chancellor before Christmas. The annual budget is usually presented November each year.

This may still happen this year, but present uncertainties regarding the Brexit outcome, and the present government’s slim majority may scupper that timetable – we may have two budgets this Autumn or none at all.

Never-the-less, we will advise if and when a date is agreed. If we do leave the EU with no-deal, gripping the sides of your chair may be in order as the fiscal changes required (changes to taxation) to meet the resulting economic consequences, may be significant.

We will keep you posted.

Are you making the most of Trivial Benefits?

Earlier this year we highlighted the tax concession afforded by the so-called Trivial Benefit rules.

We said:

It is possible to make small tax-free payments to employees, including directors…

Employers and employees don’t have to pay tax on such a benefit if all of the following apply:

  • it cost you £50 or less to provide,
  • it isn’t cash or a cash voucher,
  • it isn’t a reward for their work or performance,
  • it isn’t in the terms of their contract.

HMRC describes these payments as a ‘trivial benefit’.

You can’t receive trivial benefits worth more than £300 in a tax year if you are the director of a ‘close’ company. A close company is a limited company that’s run by 5 or fewer shareholders.

Readers who manage a business may want to integrate a formal process into their benefits strategy to take advantage of this opportunity.

Every little helps.

Tax Diary September/October 2019

1 August 2019 – Due date for Corporation Tax due for the year ended 31 October 2018.

1 September 2019 – Due date for Corporation Tax due for the year ended 30 November 2018.

19 September 2019 – PAYE and NIC deductions due for month ended 5 September 2019. (If you pay your tax electronically the due date is 22 September 2019)

19 September 2019 – Filing deadline for the CIS300 monthly return for the month ended 5 September 2019.

19 September 2019 – CIS tax deducted for the month ended 5 September 2019 is payable by today.

1 October 2019 – Due date for Corporation Tax due for the year ended 31 December 2018.

19 October 2019 – PAYE and NIC deductions due for month ended 5 October 2019. (If you pay your tax electronically the due date is 22 October 2019.)

19 October 2019 – Filing deadline for the CIS300 monthly return for the month ended 5 October 2019.

19 October 2019 – CIS tax deducted for the month ended 5 October 2019 is payable by today.

31 October 2019 – Latest date you can file a paper version of your 2019 self-assessment tax return.

Opening Banking is Here!

When is it happening?

14th September 2019

So what is Open Banking?

Open Banking is a series of reforms to how banks deal with your financial information, called for by competition watchdog the Competition and Markets Authority (CMA). It comes alongside a regulation with the snappy name ‘the second Payment Services Directive’ (PSD2), which also came into force on 13 January 2018.

In plain English, together they mean all UK-regulated banks have to let you share your financial data such as your spending habits, regular payments and companies you use (basically your bank, credit card or savings statements) with authorised providers offering budgeting apps, or other banks – as long as you give your permission.

The idea behind these changes is that they’ll bring more competition and innovation to financial services which, in turn, is hoped will lead to more and better products to help manage your money.

For example, you could connect your bank account to an app that would analyse your spending and recommend a new product like a credit card or savings account to save you money, or sign up to a provider which displays all of your accounts with multiple banks in one place so you have a better overview of your finances

To read the rest of this great article by Martin Lewis then click here.

What does this mean for our clients?

Check out these links on Xero and Quickbooks as it is likely that your current bank feed will need to be updated – don’t worry we are always here to help if you get stuck.

Client News – Taste Divine August 2019

Sharing some news for one of our lovely clients – Taste Divine
http://www.tastesdivine.co.uk/our-story/

Tastes Divine is having a very busy summer but as always, we will be running our 10 week  Monday evening cookery classes commencing Monday 23rd September at Cottingham High School 18.45 – 21.15 at a cost of £150 for the 10 weeks (this can be paid in 3 instalments as usual). The class is almost full with only a couple of places free so if you would like to join our lovely group, please let me know.

We will also be running our very popular Freezer Full of Christmas on 16th November at Cottingham High School from 10 – 4 at a cost of £50 for the day. This class is half full already & due to our other commitments, it is likely that we will only have the 1 session this year so please book your places early to avoid disappointment.

If you can’t make the above classes, why not consider one of our bespoke classes which are held at our catering base in Buttercrambe near Stamford Bridge, these classes are offered for groups of 5 students and can be run on any day & theme of your choice ie, Christmas cooking, baking, Thai, French, Tapas, Fish, Italian, Indian etc all ingredients, equipment & lunch are provided for you making this a stress free way to produce some lovely food as well as having a fabulous day out with your friends. If you don’t have any foodie friends but would like to attend one of these classes (which cost around £130pp for the day, depending on the cuisine chosen) please message me with the kind of cuisine you would like to do & I can put some dates & groups together.

Finally, we are now offering bespoke dining experiences for up to 10 people in our beautiful dining room in Buttercrambe. Menus can be tailored to suit or you can tell us your likes & dislikes & we will arrange a surprise tasting menu for you, you can supply your own alcohol or we can pair the wines with the food for you. These dining experiences make fabulous gifts & offer something different for your office Christmas party or family gathering.

Karen Manley – Taste Divine – 07810631216

If anyone would like to reserve any places or requires further information, please let Karen know – here.

Changes to private residence relief

If you rent out all or part of your home this may create a Capital Gains Tax (CGT) charge when you sell the property.

Presently, HMRC excludes the last 18 months of your ownership – even if the property is let for this time – when assessing any CGT liability. In a draft of the Finance Bill released last month, HMRC have confirmed that this 18 month period will be reduced to 9 months from April 2020.

The exemption for disabled property owners or those in a care home will continue to be 36 months.

The draft Finance Bill also confirms a change to the letting relief rules.

Letting relief is an extra deduction you can make from any CGT payable as a result of letting your home. You can claim the lowest of the following three amounts:

  1. The same amount that you can claim as private residence relief.
  2. £40,000.
  3. The same amount as the chargeable gain you made from letting your home.

From April 2020, you will only be able to claim this letting relief if you are in shared occupancy with the tenant.

Property owners contemplating the disposal of their home – which is or has been let for any period – may be advised to complete their sale before April 2020. In this way they will benefit from the 18 month exemption and the more flexible lettings relief.

Internet giants face tax-hike

It has been confirmed that from April 2020, the government will introduce a new 2% Digital Services Tax (DST) on the revenues of search engines, social media platforms and online marketplaces which derive value from UK users.

This is an attempt to tax, in the UK, revenues earned by these social media platforms from customers resident in the UK. At present, significant profits are being earned in the UK but transferred off-shore thus avoiding UK taxation.

In the notes confirming that these changes would be included in the Finance Bill 2019, HMRC said:

The revenues from the business activity – subject to DST – will include any revenue earned by the group, which is connected to the business activity, irrespective of how the business monetises the platform. If revenues are attributable to the business activity and another activity, the business will need to apportion the revenue to each activity on a just and reasonable basis.

A UK user is a user that is normally located in the UK.

The Digital Services Tax will apply to businesses that provide a social media platform, search engine or an online marketplace to UK users. These businesses will be liable to Digital Services Tax when the group’s worldwide revenues from these digital activities are more than £500m and more than £25m of these revenues are derived from UK users.

New homes to have car charge-points

In a bid to accommodate yet more electric vehicles on our roads, the government has launched a consultation aimed at increasing the number of homes with electric car charge-points. In a recent press release they said:

“All new-build homes could soon be fitted with an electric car charge-point, the government has outlined today (15 July 2019) in a public consultation on changing building regulations in England. The consultation comes alongside a package of announcements to support electric vehicle drivers and improve the experience of charging.

The proposals aim to support and encourage the growing uptake of electric vehicles within the UK by ensuring that all new homes with a dedicated car parking space are built with an electric charge-point, making charging easier, cheaper and more convenient for drivers.

The legislation would be a world first and complements wider investment and measures the government has put in place to ensure the UK has one of the best electric vehicle infrastructure networks in the world – as part of the £1.5 billion Road to Zero Strategy.

The government has also set out today that it wants to see all newly installed rapid and higher powered charge-points provide debit or credit card payment by Spring 2020.”

The government has already taken steps to ensure that existing homes are electric vehicle ready by providing up to £500 off the costs of installing a charge point at home.